Mid-Year Inventory Check: Avoid the Pitfalls of Dead Stock

Let’s face it:

Dead inventory is a hidden margin killer.

Often overlooked and underestimated, dead stock quietly accumulates in storage rooms, warehouses, or “awaiting sales” shelves. By the time its financial impact becomes apparent, the opportunity to rectify the situation may have already slipped away.

Therefore, taking stock mid-year is crucial. This is the prime time to scrutinize your inventory, streamline your assets, and devise a more efficient sales plan—before the holiday rush or more unpredictable supply chain issues arise.

Why 2025 Demands Greater Attention

Let’s be candid: 2025 has been challenging for inventory management.

Escalating holding costs, tariff ambiguities, port holdups, evolving consumer behavior, and remnants of last year's "just in case" stockpiling have left many businesses burdened with excess inventory and strained liquidity.

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The silver lining is that slow-moving inventory doesn’t have to become dead stock—provided you identify the issue early and intervene.

Comprehensive Mid-Year Inventory Evaluation

1. Conduct a Physical Inventory Audit

Yes, this means getting hands-on.

Don’t rely solely on what your systems report. Verify what's physically on the shelves.

Rationale: If records indicate 25 units but only 2 are present, your buying decisions are likely skewed. It’s vital for securing an accurate baseline and moving away from speculative tracking.

2. Perform a Sales Velocity Analysis

Identify which products are popular and which have been stagnant for weeks, or even months.

A straightforward sales velocity report can highlight slow-moving items—typically, those unsold in 90 to 180 days. This serves as a critical baseline.

Context: Products unsold over a period of three to six months aren’t "inventory"; they’re overhead.

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3. Evaluate Hidden Holding Costs

Stagnant inventory not only affects cash flow but also:

  • Consumes valuable warehouse space

  • Increases insurance and storage expenses

  • Enhances risk of theft, damage, or obsolescence

  • Disrupts stocking and sales of higher-margin goods

The longer unsold items remain, the more they cost, despite being "paid for."

4. Clarify Genuine Dead Stock

Be candid. What’s outdated, non-seasonal, or never caught customer interest?

If goods haven’t moved after multiple sales cycles, it's time to pare down.

Guideline: Inventory unsold for over half a year and non-seasonal should be flagged—personal preference nonwithstanding, it doesn’t resonate with customers.

5. Devise Tactical Mid-Year Promotions

A broad clearance isn’t necessary, but consider:

  • Pairing slow movers with trending SKUs

  • Launching limited-time flash sales

  • Offering exclusive promotions for loyal patrons

  • Innovatively repositioning languishing items

Still not selling? Consider donation (potential tax benefits), liquidation, or repurposing to prevent further financial drain.

6. Leverage Insights for Future Forecasting

Every unsold product narrates a story. Was it a fading trend? A shift in demand? A misguided supplier incentive?

Apply these insights to fine-tune your procurement and forecasting for Q3 and Q4:

  • Align orders closely with real demand

  • Minimize overstock risks

  • Enhance cash flow

  • Emphasize selling what’s in demand currently, not aspirationally

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Monitor Your Inventory Turnover Ratio

For the data-enthused, track your inventory's annual sales and replenishment cycle.

Low turnover implies capital tied up in stock. Higher turnover indicates improved cash flow, margins, and efficiency.

Even basic indicators of rapid-moving inventory can guide improved reorder and promotion strategies.

Final Thoughts: Retain Control of Your Inventory

Your inventory management should be proactive.
It shouldn’t dictate your operations.

Whether operating a retail outlet, overseeing shipping from a storage unit, or managing multiple warehouses, here lies the opportunity to clarify your strengths and weaknesses.

By the year’s end, it’s too late to mend issues identified mid-year.

Seeking Inventory Strategy Expertise?

At MJ Ahmed CPA PLLC, we specialize in reviewing inventory strategies, identifying financial opportunities, and crafting plans to safeguard profitability year-round.

Let’s optimize and harness your inventory for better returns.

Contact our office today.

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